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Crypto Exchanges& Regulation in USA

Top exchanges in USA by Coincub criteria
Article review author
Jonathan Lea
USA head image

Crypto Country Rating: 8.2/10

9/10
Institutional acceptance
Many institutions looking to harness consumer demand. US in global top spot for mining
10/10
Exchanges & Wallets availability
Leading exchanges present, and one listed on stock market
8.5/10
Government regulation
Proposed new regulation centred on making crypto safer for investors
5/10
Defi acceptance
Low acceptance
8/10
Financial services
Institutional funds looking to embrace crypto in some way
7/10
Transparency
Identification required and crypto services coming into mainstream
8.5/10
Spending crypto
Large corporations leading in adoption of crypto payments
9.5/10
Banks activity in crypto
Consumer demand driving increasing retail banking sector acceptance.

Bitcoin and cryptocurrency trading in USA

Ukraine, inflation on the move, the prospect of rising interest rate rises and the huge drop in crypto prices early during 2022 have dampened the appetite for risky investments – including Bitcoin, to say the least. In the US and elsewhere, many investors are removing risk from their portfolios at the moment.

However, the US, much like Australia sees greater and clearer regulation of the crypto industry as the best approach for reducing risk rather than hardline bans and prohibitions. The Federal Reserve is also looking at issuing a U.S. digital currency.

That said, the US still has by far the highest number of ATMs in the Coincub ranking and is equaled only by Germany in the high number of its Bitcoin nodes. Its percentage of the population owning crypto is huge, but just behind Singapore. In pure numbers, the US’ 27 million people holding crypto shows just how crypto enthusiastic the country is.

US regulators by and large see existing laws to bring cryptocurrencies under their supervision as being adequate without the need for new legislation, but that doesn’t mean new legislation won’t be forthcoming and the subject still creates much debate.

A recent report from March 2022 by the Center for American Progress (CAP), for example, regarding the way forward to govern crypto forcefully suggests the need for Congress to take adopt a new path for crypto regulation. It argues that crypto assets, securities, commodities, stablecoins and NFTs should be regulated in the same way as traditional currency/cash and should not be allowed to stand alone under a distinct regulatory regime. The debate continues but the US remains a powerhouse of crypto adoption – despite the turmoil affecting the world at the moment.

The US gets a high score for wide consumer acceptance of crypto, with one of the world’s leading exchange listed on Wall St. and retail banks looking to compete for services, but a disparate crypto focus from state to state.

Law and crypto trading in USA

Legal - existing crypto legislation

The good news is that investing or trading in cryptocurrencies such as bitcoin is legal and well established in the US. The gains or losses you make will have a bearing on your tax situation.

The IRS plays hardball with tax and failure to declare that you’re investing in bitcoin can leave you open to severe penalties. There are an ever-increasing number of crypto exchanges that make it easy and straightforward to buy, sell and invest in bitcoin (BTC) and other cryptocurrencies.  Most will also prepare the records of transactions you need to make your tax declarations.

Under pending new laws an exchange that undertakes crypto trades for clients will be required to report tax information about those trades to the IRS. This is mooted as being ‘investor friendly’ because it means you’re less likely (almost certainly less likely) to forget to file your tax returns. In official terms it makes tax compliance easier.

Legal - forthcoming crypto legislation

Legislation is constantly being reviewed and passed, mainly to do with money-laundering and taxation.

Taxing cryptocurrencies in USA

Income Tax

America’s Internal Revenue Service (IRS) identifies crypto assets as property, not currency. As a result, the tax rules that apply to dealing in other forms of property such as rare coins or stamps that can be traded for profit also apply to bitcoin and other cryptocurrencies.

There are no taxes on buying or holding cryptocurrency. Crypto received in a fork becomes taxable when you have the ability to transfer, sell, exchange or otherwise do something with it. However, you will be taxed on any transactions you make and you’ll have to notify the IRS of your trading in the year. Tax payable varies on transactions you make in the short term and over the long term.

Tax relief

Holding bitcoins in your wallet and sitting on them, or transferring them between wallets incurs no tax, but make sure you aren’t getting confused – it’s easy to do – between transferring them, transacting them or disposing of them.

On the plus side, your losses may be deductible and can also be used to offset capital gains in a given tax year. Once again, keeping records is vital and the IRS will most certainly want an account of your activity for tax records and are hot on evasion.

Tax when moving residency

As with any income, your bitcoin will come under the tax laws of the country where you are legally resident. If you move outside the US but are still resident, make sure you have detailed transaction reports about your purchases and sales across all exchanges you used. If you set up a business to trade bitcoin, that business will come under the tax laws of the country it operates from.

Tax on mining

It’s highly technical and beyond the scope of most individuals but mining for bitcoins or any other cryptocurrency in the US is, you guessed it, a taxable event. Not that it’s putting anyone off as the United States is the global top dog for bitcoin mining. The title was held by China but that country has gone into crypto-reverse with cogent bans on crypto trading that have brought the activity to a standstill. As a result the US is up from around 21.8% this year compared with 4.2% a year ago. For the record, Kazakhstan (18.1%), Russia (11.2%) and Canada (9.6%) were other leading destinations for bitcoin miners. If you do go in for mining, you can make business deductions for equipment and resources but deductions are related to whether you are mining as a business or for personal gain. Your mined coins will be valued at their fair market price and you’ll also be taxed on your transactions with it. The moral of the story? Keep records!

Crypto financial services in USA

Fin services - retirement planning

Investing in bitcoin for retirement purposes is legal practice but generally carries high fees due to the volatility and risk involved.

Fin services - banking

A growing number of banks will be able to offer crypto custody services to facilitate account holders who require it – buying crypto through bank relationships as opposed to through apps. This is a breakthrough moment for crypto in the US.

With crypto services offered to high net worth clients through investment banks, the trend is to allow small investors some sort of access to crypto through mainstream banks and services.

Fin Services - DeFi

DeFi is a controversial subject the world over and for the US financial system, the jury is out as to its mainstream adoption, even though many organizations appear to be investing in DeFi protocols.

Using crypto in USA

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Spend

The US is leading the way in the adoption of bitcoin and has several world brands that accept bitcoin payments including, most famously, Microsoft, Overstock, and Starbucks. In most cases, it is possible to buy vouchers with your cryptocurrency that may then be indirectly used with participating outlets.

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Gifting crypto

If you’re feeling generous, you can gift crypto up to $15,000 per recipient per year without paying taxes but if it exceeds this amount per recipient, you must make a gift tax return. You can give a gift to a recognized charity or non-profit organization free of tax and most crypto exchanges will be able to advise on gifting your cryptocurrency.

Crypto regulation in USA

Security

Blockchain technology has promoted an upsurge in cryptocurrencies and crypto trading. With returns on cash suffering from worldwide low interest, there has been huge interest in bitcoin and other digital assets/currencies as a form of investment and speculation.

Remember, as a beginner or experienced trader it pays to do some research and only deal with crypto exchanges that are established and carry insurance to protect your investment. Claiming a loss through fraud or theft is quite complex as there are so many definitions to comply with, including asset price and circumstances. You’re more likely to gain relief through a wider loss caused by a common disaster.

Transparency

Identification is required and doing your homework is always a good idea. Before trading, determine what sort of exchange and wallet you need, what fees are involved, etc. Reputable exchanges carry insurance against fraud or hacking, so in this event, you’re more likely to be claiming some form of compensation from the exchange where the system has broken down.

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.

What people say about us

Aayush Bhatnagar JIO - Senior Vice President

Coincub is a novel crypto exchange aggregator that helps investors to compare different exchanges before taking their decision.

James Gillingham Co-Founder and CEO at FINXFLO

The most comprehensive analysis I found. Have a look, you might be surprised.

Jonathan Knegtel CEO Blockdata

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